Policy priorities 2018

Our policy priorities – Building Trust through Transparency, Promoting Development through Open Investment and Stimulating Innovation through Global Cooperation – are the culmination of discussions among AmCham China members and supported by data drawn from the annual Business Climate Survey of member companies and the American Business in China White Paper of policy issues.

China’s economic development has progressed along a unique path as a product of historical tradition, technological context and government intervention. The result is an economy that now differs from others, sometimes significantly, in many respects. There is a lot to commend adopting novel approaches to novel situations, but it is also important to recognize what is different, and what is ineffective, inefficient or just plain wrong.

Our Policy Priorities aren’t a prescription for making China’s economy look that of the United States. Rather, they recognize China’s current state of development, but also aspire to something much greater. They are the culmination of discussions among AmCham China members and supported by data drawn from the annual Business Climate Survey of member companies and the American Business in China White Paper of policy issues.

These priorities reflect, therefore, the opinions of the chamber’s 3,300 members (half of whom are Chinese nationals) from 900 member companies headquartered not just in the US, but also Europe, Australia and other parts of Asia. As a focus of our advocacy efforts, these priorities form a core part of conversations with Chinese government, US government, media, academics and other stakeholders throughout the year.

It is important to note the collaborative nature of the priorities, by building trust, opening up and cooperating globally. China may be big, but the globalization that has fueled its success so far will remain an important factor in future development. We hope, therefore, that these priorities will be seen as a starting point for finding common ground and constructive discussions on China’s future.

Building Trust through Clarity and Consistency

The stability and predictability provided by an unambiguous regulatory environment will be important for China’s continued growth, and we urge the Chinese government to close the effectiveness gap between legislation and its enforcement through an inclusive process for participation in the formulation and implementation of laws and regulations. Moreover, greater transparency would not only assist the government’s fight against corruption, but also boost confidence in private companies, both domestic and overseas, that their investments will be fairly protected under law.

Inconsistent/unclear laws and enforcement are still the No. 1 challenge for AmCham China members. (2018 Business Climate Survey)

If realized, greater transparency, predictability and fairness of the regulatory environment was cited by more than half of members as a potentially very or extremely significant driver of new investment. (2018 Business Climate Survey)

China ranks 78 out of 190 in the Ease of Doing Business index for 2017, just ahead of Panama and Kenya. (The World Bank)

Concerning regulatory quality in the Worldwide Governance Indicators in 2016, China continued to deteriorate between 2010 and 2016 but experienced an improvement in terms of rule of law compared to previous years. (The World Bank)

China ranks 69 out of 113 countries for regulatory enforcement in the 2017-2018 Rule of Law Index, compared with 80 out of 113 countries the previous year. (World Justice Project)

To improve transparency and equal enforcement of laws and regulations, we recommend that the Chinese government:

Continue progress in providing 30-day notice and comment periods for all draft laws and regulations across the board, and preferably 60 days where needed.

Extend to all courts the commitment to online publication of all court cases within seven working days of a ruling as required by 2016 regulations.

Clarify customs and tax regulations so that foreign companies can fully comply and make more informed investment decisions.

End the use of “window guidance” and release public directives instead.

Provide written explanations whenever administrative agencies deny or provide conditioned approvals for license applications or other approval applications, and adhere to decision deadlines provided for in relevant laws and regulations.

Promoting Development through Open Investment

The benefits of open, vibrant markets extend well beyond foreign-invested enterprises. We believe government policy should help all parties in Chinese society – including consumers, farmers, and private companies. This is especially important given the increasing scrutiny of the US-China commercial relationship and the questions being raised internationally about the greater market access enjoyed by Chinese companies overseas compared to the access foreign-invested companies have in China.

The economic and technological impact of foreign-invested companies, and the ripple effects through their supply chains and the spending of employees, averaged 33% of China’s GDP from 2009 to 2013. (Developing China: The Remarkable Impact of Foreign Direct Investment.)

China ranked 65 out of 68 countries in the Total FDI Restrictiveness Index in the last review in 2017, just ahead of Indonesia. (Organization of Economic Cooperation and Development)

More companies say the investment environment is deteriorating or staying the same rather than improving (65% vs. 35%). (2018 Business Climate Survey)

Around half of members (46%) believe foreign companies are treated unfairly; 75% feel less welcome than before. (2018 Business Climate Survey)

To improve the investment environment, we recommend that the Chinese government:

Implement market opening in more sectors to achieve a more balanced investment relationship. If Chinese businesses can make an investment in the US, American companies should be able to make the same investment in China without equity caps.

Ensure that national security reviews and “secure and controllable” technology requirements are narrowly applied and are not used for economic protectionism or to implement industrial policy.

Actively work with the US to negotiate a robust US-China BIT with a short negative list, narrowly crafted exceptions, and text that ensures the full benefits of the treaty can be effectively reached within China’s unique market.

Make bold reforms in PFTZs and implement successful reforms nationwide on an expedited basis.

Ensure equal participation for foreign and domestic firms in the “Made in China 2025” initiative and take measures to ensure that the initiative focuses on high-quality innovation and does not cause market-distorting overcapacity in its target industries.

Allow foreign companies to participate on an equal footing with domestic competitors when bidding for government procurement contracts.

Stimulating Innovation through Global Cooperation

To realize its innovation goals, China will need to strengthen its infrastructure and open its institutions to allow information to flow more freely. Creativity is the product of diverse ideas combined in an environment where standards are set with broad participation and intellectual property is protected from theft. We believe the rapid pace of innovation exceeds the ability of any single government to manage, meaning that technology regulation requires public-private engagement across borders.

Innovation is a top 3 priority for half (49%) of our members. (2018 Business Climate Survey)

Lack of sufficient IP protection is the No. 2 (27%) barrier to increasing innovation in China. (2018 Business Climate Survey)

After strong improvements at the end of the last decade, the standard of intellectual property rights protection in China has stagnated. (The International Property Rights Index 2017)

We recommend that the Chinese government:

Develop a comprehensive trade secrets law.

Continue the successful development of intellectual property courts and limit administrative enforcement in patent disputes.

Open all standards development technical committees to FIEs so that they can participate on an equal basis with domestic companies.

Promote the Internet as a platform for global interaction and limit restrictions on cross-border data flows such as those proposed in the Cybersecurity Law to encourage international collaboration and innovation.

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The American Chamber of Commerce in the People's Republic of China is a non-profit, non-governmental organization whose membership comprises more than 3,300 individuals from 900 companies operating across China. The chamber's nationwide mission is to help American companies succeed in China through advocacy, information, networking and business support services. AmCham China is the only officially recognized chamber of commerce representing American business in mainland China. With offices in Beijing, Tianjin, Dalian, Shenyang and Wuhan, AmCham China has more than 50 working groups, and holds more than 250 events each year.